Labor unions have long been at odds with California charter cities over whether such cities must pay prevailing wages on public works projects. While many charter cities have either not exempted themselves from state prevailing wage laws, or have passed their own prevailing wage laws, other charter cities have no prevailing wage laws for public works projects whatsoever. The building trades have challenged those charter cities which have no such laws. However, the California Supreme Court recently sided with the charter cities on this issue. In State Building and Construction Trades Council of California AFL-CIO v. City of Vista (July 2, 2012, S173586) ___ Cal.4th ___. Relying on 80 years of precedent, the Court held that contract worker wages of locally funded public works are municipal affairs, not of statewide concern, and are exempt from state prevailing wage laws (see City of Pasadena v. Charleville (1932) 215 Cal. 384, 389).
Continue Reading Charter Cities Are Not Required to Pay Prevailing Wages on Local Public Works Projects

Can a supplier of construction materials be considered a “subcontractor” for purposes of enforcing its claim on a public works payment bond? The answer is “yes” according to a recent decision of the California Court of Appeal. In Eggers Industries v. Flintco, Inc., et al., 201 Cal. App. 4th 536 (3d Dist. 2011), rev. denied (Feb. 15, 2012). The Court affirmed the rule that a “subcontractor’s status as a subcontractor must be determined based on what the subcontractor agrees to do, not what it actually ends up doing,” citing a fifty year-old California Supreme Court decision. In so holding, Eggers provides important guidance regarding the scope of recovery against a public works payment bond permitted by Civil Code sec. 3248 and its replacement, the newly chaptered Civil Code sec. 9554, which takes effect in July 2012.
Continue Reading Court Broadly Defines Subcontractors Who Qualify For Payment Bond Claims

In 2009, the California legislature amended Section 143 of the Streets and Highways Code and greatly expanded availability of the public-private partnership (“P3”) as a mechanism to finance transportation infrastructure projects. In early 2010, under the authority of the newly amended Section 143, the California Department of Transportation (“CalTrans”) began to implement part of the Presidio Parkway Project (“Project”) as a P3.
Continue Reading Public Private Partnership Upheld For Construction of Presidio Parkway

By Bram Hanono and Greg Woodard

California Labor Code sections 1720 et seq. (the Prevailing Wage Law) ("PWL") require employers (including developers and contractors) engaged in public works projects to pay the prevailing wage to their employees if the project is "paid for in whole or in part out of public funds." The Second Appellate District Court of Appeal recently ruled that private developers must pay prevailing wages for the construction of all public improvements in connection with a development project if public funds are used to finance any part of the public improvements, even if the remaining public improvements are paid for with private funds. The California Supreme Court declined to hear the developer’s appeal. Therefore, developers and contractors could face increased project costs as a result of this case.
 Continue Reading Developers Must Pay Prevailing Wages for Privately Financed Public Infrastructure

This article is the fifth in a series summarizing construction law developments for 2010.

By Candace Matson, Harold Hamersmith & Helen Lauderdale

A. Bidding

  1. Great West Contractors Inc. v. Irvine School District, 187 Cal. App. 4th 1425 (4th Dist. Aug. 2010)

In Great West Contractors, the Fourth District held that a public agency’s rejection of a bid for a public works project on the basis that a corporate bidder did not list its officers’ licenses is a question of bidder responsibility, not bid responsiveness, and therefore a due process hearing was required. The Court of Appeal said that the case is important for two reasons. First, it presents a challenging problem in public contracting law: how to distinguish a "non-responsive" bid from a de facto determination that the bidder is not a "responsible" bidder. Second, the case presents what the court called "an object lesson in how evidence that, at least on its face, tends to show favoritism – indeed, on this record, favoritism most foul – never got squarely presented to, or considered by, the trial court." The Court invited readers of the opinion to judge for themselves whether "stonewalling" might not be a better word than "delay" for describing the public agency’s actions.
 Continue Reading The Year 2010 In Review: Public Works Projects

By Bram Hanono

The Fraud Enforcement and Recovery Act (FERA)[1] was signed into law in May 2009. Among other significant changes, FERA expanded the grounds for liability under the False Claims Act (FCA).[2] Public works contractors who work on projects funded with federal funds now stand an increased risk for potential liability under the FCA. The FCA now covers, for example, state and local agency projects where the public agency has received a grant of federal funds to build the project. And it includes projects only partially funded by federal money. Accordingly, federal, state, and local contractors should ensure that they have appropriate compliance systems and controls in place to deal with the enhanced FCA.
 Continue Reading Congress Increases False Claims Liability for Public Works Contractors

By Edward Lozowicki

In a recent decision the California Supreme Court expanded the implied warranty of specification suitability to include claims for a public agency’s failure to disclose material information. In doing so it resolved a split in the decisions of the lower appellate courts. Notably, the Court adopts virtually the same rationale recognized by the Federal Circuit and Court of Federal Claims on federal procurement contracts, namely, the "superior knowledge" doctrine. In Los Angeles Unified School Dist. v. Great American Ins., 49 Cal. 4th 738, 2010 WL 2720825 (July 12, 2010), the Court held that a contractor need not prove intentional misrepresentation to recover compensation for a public entity’s failure to disclose material information. The Court expressly disapproved Jasper Construction v. Foothill Junior College, (1979) 91 Cal. App. 3d 1, which held to the contrary.
 Continue Reading Contractors Can Recover for Public Agency’s Failure to Disclose Material Information

By Edward B. Lozowicki and Bram Hanono

Dillingham-Ray Wilson v. City of Los Angeles, 182 Cal.App.4th 1396 (opinion modified by 106 Cal.Rptr.3d 691, (April 16, 2010, No. B192900))

In Dillingham-Ray Wilson v. City of Los Angeles, the California Court of Appeal signaled its holding in the first sentence of its opinion: "The City of Los Angeles (City) obtained millions of dollars worth of construction work that it does not want to pay for." The City argued it was absolved of any obligation to pay the contractor, Dillingham-Ray Wilson (DRW), pursuant to Public Contracts Code sections 7105 and 7107 and Amelco Electric v. City of Thousand Oaks (2002) 27 Cal.4th 228 on the theory that they dictate a method of proving contract damages, a method DRW said was impossible under the circumstances. The Court disagreed because "section 7107 [sic] and Amelco impact the measure of damages, not the method of proving them . . . ." The Court also held that the modified total cost method of proving damages is permissible in California.
 Continue Reading Modified Total Cost Method of Proving Damages: Approved For California Public Works

By Robert T. Sturgeon

Harper/Neilsen-Dillingham, Builders, Inc. v. United States, 81 Fed. Cl. 667 (2008)

California has long followed a public policy which limits the enforcement of so-called "no damage for delay" clauses in construction contracts on public projects. The policy is embodied in part by section 7102 of the Public Contract Code, which limits the enforcement of such clauses contained in both public contracts between contractors and public entities, and in subcontracts between private parties relating to public projects. The rule against "no damage for delay" clauses is based on the common law principle that courts should strictly construe clauses which work a forfeiture, a policy which arguably applies with equal force to both public and private contracts. In this regard California Civil Code section 1635 provides that public and private contracts are to be interpreted by the same rules. Thus, many California practitioners believe that the rule does or should extend generally to all construction contracts, both public and private. The case of Harper/Nielson-Dillingham Builders, Inc. v. United States is significant because it presents a potential exception to this long-standing rule. In Harper/Nielson-Dillingham, the United States Court of Federal Claims held that under California law, "no damage for delay" clauses in contracts between private parties on federal public works projects are per se enforceable, and that a federal agency may successfully defeat a subcontractor’s pass-through delay claim by relying on a "no damage for delay" clause in the subcontract between the general contractor and subcontractor.
 Continue Reading Federal Court Holds “No Damage for Delay” Clauses Are Per Se Enforceable on Federal Public Works Projects in California

By Edward B. Lozowicki

As residential and commercial construction markets evaporate and contractors fight for survival, new opportunities are appearing in the form of public infrastructure projects. The federal government is pouring money into public infrastructure and construction projects, to the tune of about $143 billion in total. Of that total, about $14 billion is designated for the California market. In addition, the State continues to fund projects from Proposition 1B and 1C bonds, and gas tax revenues. Much of the money will fund infrastructure projects awarded by the state and local government agencies. These new opportunities, however, come with new risks. One such risk is a general contractor’s liability for its subcontractors’ unpaid or under-paid employees on public infrastructure projects.
 Continue Reading General Contractors’ Liability to Subcontractors’ Employees On Public Infrastructure Projects

By James G. Higgins

Prompt payment laws can pose significant risk to owners and contractors.  In S&S Cummins Corp. v. West Bay Builders, Inc. 2008 Cal. App. LEXIS 160, *, a public works general contractor was stung under Public Contract Code section 7107 for delaying retention payments to an electrical subcontractor.Continue Reading Court Clarifies Prompt Payment Risks to Contractor